Dre and Iovine slapped with a lawsuit
The man who claims to be the brains behind headphone maker Beats Electronics is suing his former business partners, rapper Dr. Dre and record producer Jimmy Iovine. In a complaint filed in the San Mateo Superior Court this week, Noel Lee claims that Dre and Iovine, along with Beats board member and investor Paul Wachter, cheated him out of $150 million.
Lee held 5 percent of shares in Beats, which was partnered with his company, Monster LLC, a manufacturer of video and audio cables. The partnership between Monster and Beats was terminated in 2012, when Lee decided to let the contract expire. It seems there were disagreements as to who was responsible for Beat’s tremendous profits in the headphone market, with Lee claiming to have hatched much of the scheme, while other executives argued that their success was due to Dr. Dre’s celebrity status. Beats went on to partner with smartphone maker HTC, and was recently sold to Apple.
Lee claims that Dre and Lovine crafted a sham deal with HTC, facilitating the termination of the Beats and Monster contract, and prompting Lee to dramatically pare down and eventually sell the rest of his shares in Beats. He says that Beats executives had assured them they had no plans to sell the company. If Lee had kept his investments in Beats, he would have made $150 million on the deal with Apple.
Lee isn’t the only former Beats executive who feels double-crossed. Beats in currently in court with David Hyman, whose streaming service MOG was sold to Beats in 2012. Hyman claims that Beats broke contractual agreements so that they could fire him before his equity came to fruition, cheating him out of millions of dollars. Watch for this case to unfold – it might not be the last of its nature.